Asia stocks saunter toward historic high, US earnings hurdle

SYDNEY: Asian shares crept toward all-time peaks on Monday after Wall Street boasted its best start to a year in over a decade, with brisk economic growth and benign inflation proving a potent cocktail for risk appetites.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.2 percent having climbed 3.1 percent last week, its strongest performance in six months. At 588.55, the index is within spitting distance of its record top of 591.50 hit in November 2007.

The Philippines is already at a record, while Australian stocks eked out another decade top. Japan’s Nikkei was closed for a holiday but last week touched its highest since 1992.E-Mini futures for the S&P 500 edged up 0.1 percent while spreadbetters pointed to opening gains for Europe.

“It was the global synchronised growth that drove earnings and equity markets higher last year and the global economy has entered 2018 firing on all cylinders,” said analysts at Bank of America Merrill Lynch, predicting the global economy could expand at 4 percent or more this year.

“This growth is keeping our quant models bullish and driving earnings revisions to new highs,” they added. “We stay long outside the U.S., with Asia ex-Japan and Nikkei our growth plays, Europe still for yield.”

Friday’s U.S. jobs report did nothing to challenge that outlook.

While payrolls missed forecasts, the report was perfect for equities given unemployment stayed low but with little sign of the inflationary pressures that would make the Federal Reserve more aggressive in tightening policy.

Wall Street has already enjoyed its best start to a year in more than a decade, with the Dow up 2.3 percent last week and the S&P 500 2.6 percent. The tech-heavy Nasdaq led the charge with a rise of 3.4 percent.

The quarterly U.S. earnings season kicks off this week with the Street expecting solid growth of around 10 percent, though many companies are also likely to be announcing one-off charges to account for recent tax changes.